2/14/2013 5:00 PM ET|
401k balances hit record highs
Retirement accounts are growing fast, thanks to the surging stock market and increased contributions from workers and their employers.
A combination of investment gains and worker contributions helped push the average amount stashed in a 401k to its highest level ever by the end of 2012, according to the latest Fidelity Investments analysis of the retirement savings plans it manages.
But the average, while 12% higher than a year earlier, totals just $77,300, according to Fidelity's data, which covers 12 million participants. That is a fairly dismal sign that there are some difficult retirement years ahead for many savers.
Still, that overall average balance counts savers young and old, so presumably many of those people have years of contributions ahead of them.
Meanwhile, for workers aged 55 and over, the average balance is $143,300. Not so great, but these savers may have other workplace plans or IRAs not covered by Fidelity's data.
The numbers look a bit better for workers 55 and over who have contributed to the same plan without interruption for 10 years: Their average account balance is $243,800.
For a growing portion of people, their retirement plan is to work longer. A separate study found that 62% of workers aged 45 to 60 plan to delay retirement. That's up from 42% in 2010, according to a survey of 15,000 people by the Conference Board, a nonprofit business-research organization.
Savings rates rise with age
Not surprisingly, older workers manage to set more aside each paycheck than their younger co-workers do.
Among older workers, 401k contribution rates averaged 11.4% for workers aged 65 to 69, 10.6% for those aged 60 to 64, and 10% for those aged 55 to 59. If you add in the employer match, the average savings rate for each of those groups was 14.9%, 14.2% and 13.6%, respectively, according to Fidelity.
Contribution rates are substantially lower among younger savers. Workers aged 20 to 24 saved 5.4% of their salary on average, those aged 25 to 29 saved 5.9%, and those aged 30 to 34 saved 6.5%. With the employer match included, those figures jumped to 8.1%, 9.1% and 9.7%.
Workers aged 35 to 39 saved 7.2% on average (10.4% with the employer match). Those aged 40 to 44 saved 7.6% (10.9% with the match). Those aged 45 to 49 saved 8% on average (11.4% with the match). Those aged 50 to 54 saved 9.2% on average (12.7% with match).
Young savers embrace Roth 401k's
Thirty-seven percent of the workplace plans studied by Fidelity offer a Roth 401k option, up from 12% five years ago.
Among workers who have access to a Roth, savers in their 20s are likelier to use the option, Fidelity said. Ten percent of 20-something plan participants contribute to a Roth 401k, versus 6% of plan participants overall.
Workers who tap a Roth 401k tend to have higher savings rates, putting aside 11% on average (15.3% with employer contributions), versus an 8% average for workers overall (12% with employer share added).
"You get some people who are more predisposed to saving," said Beth McHugh, vice president of market insights at Fidelity. "Those are the individuals that we repeatedly see they will take advantage of any and all opportunities for saving."
When plan participants call Fidelity for advice, those who ask about Roth 401k's "are often a bit more engaged," McHugh added. "They want to not only take advantage of all the savings opportunities; they want to save in the smartest way possible. They say, 'Let me look not only at my asset allocation but also my tax diversification. How is the way I'm saving today going to impact me tomorrow?'"
Also, 59% of people who contribute to a Roth stash tax-deferred money into their regular 401k as well, according to the Fidelity data.
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Maybe so, but just wait.. your government has eyes on rescueing it from
everyone and give you an annuity...... Just a matter of time..
While I understand many people are unemployed or underemployed and can't save, many people choose to not save for retirement until it is too late.
I have maxed out my 401k for the past several years and it adds up quickly. By saving the max (currently $17,500) per year, along with an average company match of 3%, I accumulate around 100K every 5 years in my 401k.
This involves some sacrifice which I have gotten used to. I don't buy stuff I don't need. My car is 14 years old (and runs fine). My paycheck covers my expenses (which I control) and I save the rest.
I don't count on benefiting from Social Security by the time I retire. If it is still there, that will be a welcomed bonus.
When the stock market experiences corrections (as it will periodically), I buy more shares at lower prices. Eventually it recovers...and those people who don't panic (and sell) are rewarded.
I anticipate that at as I get older, I may experience periods of unemployment. I've planned for that with an emergency fund. I understand I am not entitled to my job, or anything else for that matter. My security is based on partly on luck and circumstance, but mostly by my willingness to provide it for myself.
I'm the friendly guy down the hall who makes well below the median salary for the company.
If you are willing to educate yourself in personal finance and willing to save rather than spend, you can have a financially secure retirement.
I am looking forward to retirement, and as you may have guessed, I have some plans.
No way, the government is just going to take everyone's 401k money... At worst they will remove some of the tax breaks for contributing. That would still hurt big for a lot of people though.
Yay, thanks to Fed printing at historical record levels it only took five years to get our money back, less inflation of course. Now lets see, what’s that word that comes after Pump. I know it rhymes with pump, and it starts with a D……
The thing that cracks me up the most is that y'all don't get that the stock market is cyclical. Yup, like a yo-yo, it goes up and down. Fact is, over the long run, the stock market out performs all other forms of investments. Real estate can do good, but it can be a lot harder to liquidate, and not everyone wants to be a landlord.
Historically the market does better over time when a democrat is in office. Could be policy, or most likely it's because they have been in office longer. The market did great in the 80's when Reagan's policies kicked in after the fiasco of Carter. Then the cycle ended, and the market corrected in '87, The market recovered and did good during Bush 1, and Clinton. The high tech bubble burst in March 2000, and the cycle started again.
Bonds also go in cycles. Interest rates low, bonds die. Annuities?, That's just an insurance company paying you 6%, and investing your money in more lucrative things (stocks, etc). They make the profit in investing while using your money to do it......
The bottom line is if you want to retire comfortably, start early in life. Invest some of your paycheck in good growth non-load mutual funds. Dollar cost average. Meaning when the market is up you invest, when it's down you invest (and get more for your money). Unfortunately, most people aren't disciplined to save. That is why 401K's and IRA's don't work with most people. Our country has to many people who want instant gratification, and won't take responsibility for their own actions. Get rid of debt, save, and invest in yourself.
I'm 50, started putting 4000 a year away when I was 21. Invested with good growth mutual funds, and dollar cost averaged. I rode all this markets up, and down completely. I STUCK with investing. I currently have over 500K , it can be done. BTW, I use my tax returns to fund this also, remember to delay the gratification. LIke Dave Ramsey Says: Live like no one else, so that some day you can LIVE like no one else.
Cash out of your 401K NOW!!!....it's only a matter of time before Obamy needs it to support his voter base of "where-my-free-sheeet-at" kneegrows and lazy illegal Mexicans.
MORTGAGE AND DEBT FREE: I guess you havn`t been following things.The auto industry
is doing great, the cruise lines are booked, corporate profits are way up and the
market is up 70% in 4 years.Looks like you`re missing the boat.My business is ex-
pnding and we`re making a ton with stocks.I know the Repubs would love to see a
depression.None in sight pal.The only thing bad is gold.Down another 3% this
week.There`s always somebody that hates a good party.The GOP.
Just how many companies still provide a pension? How many companies dropped or lowered any matching contributions to their employee 401K plans? All you hear about are pensions being eliminated or frozen along with benefits. The extra amount people have had to ante up for medical benefits and out of pocket medical expenses has eaten up much of their ability to save for retirement.
As for being in the stock market, most companies have reduced or eliminated dividend and capital gain payouts, and with stock prices now at or near highs not seen since early 2008, it will cost you more to get into the market. Slow and steady retirement investing may be the only answer.
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